As defined by the Centers for Medicare and Medicaid Services (CMS),  

“Medical director refers to a physician who oversees the medical care and other designated care and services in a healthcare organization or facility. Under these regulations, the medical director is responsible for coordinating medical care and helping to develop, implement and evaluate resident care policies and procedures that reflect current standards of practice.” 

CMS requires respiratory, anesthesia, radiology and emergency services programs to have a medical director. There are a number of other programs that commonly have medical directors, including: 

Medical directorships are governed by a collection of federal and state regulations, including: 

• Stark Law–42 USC §1395nn 
• Anti-Kickback Statute–42 USC §1320a-7b(b) 
• False Claims Act–31 USC §3730 
• Code of Federal Regulations (CFR) 
• Civil Monetary Penalties Law 

So medical directorships are necessary but potentially complicated.  

Key considerations for government enforcement and focus are: 

• A single provider with too many Medical Directorships, 
• A Directorship that is neither substantive nor well-defined, 
• Fair market value and excessive compensation, 
• Uniform contracts and  
• Illegal referrals. 

Compliance Best Practices for Medical Directorships 

At Octave Leadership Advisory Services, we have developed a number of best practices for creating medical directorships: 

• Typically, stand-alone contracts for medical directorships that are separate from employment and other arrangements. 
• Ensure compensation is reasonable and at fair market value. Consider using MGMA or a third party to validate the compensation and retain the documentation with the contract file. 
• Clearly define and enforce expectations and duties, particularly for time allocation, compensation and documentation. Tailor directorship to the specific program oversight rather than creating “cookie cutter” medical director contracts. For example:
  
  

• Implement and enforce documentation of services. 
• Include the compliance officer in physician arrangement discussions. 

 At a minimum, when creating medical directorships, be sure to: 

• Always work with your organization’s healthcare attorney on physician arrangements. 
• Ensure medical directorships are substantive, well-defined and compliant with applicable laws, e.g., the Stark Law. 
• Hold physicians accountable for their expectations. 
• Make sure compliance has a seat at the table for physician arrangements.